Vasu Raja’s Golden Parachute: What $1.4M Buys American Airlines – View from the Wing

On May 28, American Airlines announced that Chief Commercial Officer Vasu Raja would be exited in June. His employment actually ended June 30.

Vasu Raja staked out bold positions. He felt too strongly that the airline’s schedule was its product – rather than its service and experience. He architected their Sun Belt focus and shift away from managed travel. And he elevated the centrality of the carrier’s loyalty program as part of its core business strategy and not just as a financial instrument.

It was mostly declining business travel market share that led to his dismissal, because perhaps otherwise the airline’s CEO would have worn the consequences. Now, in a Friday evening news dump from American in the form of an SEC filing, we know about his severance, which is approximately $1.43 million.

• He remains on payroll through January 31, 2025 collecting an additional $462,019.00
• Then he receives a payout of $968,750, plus $261 towards COBRA continuation health coverage
• Officer travel privileges (confirmed travel in any class of service including for spouse or companion and dependent children; Executive Platinum status with Admirals Club access) through January 31, then he receives “‘the 65-point plan space available travel’ privileges for Executive and Executive’s eligible family members pursuant to the terms and conditions set forth in the Company’s travel policy for officers, as may be amended from time to time.”

  However American will not gross up the tax liability for this travel, and this travel is for personal and not business purposes.

• Career transition services from Lee Hecht Harrison.
• He’s subject to non-compete and non-solicitation rules through January 31, 2025.

Most readers will see $1.4 million in severance as extremely generous. Most of us expect just two weeks! But his compensation package last year was worth $12.2 million.

Raja’s earning ability remains strong. He could go lead an airline, consult in the industry, or work for suppliers. He likely has the freedom to pick and choose, should he wish to take his time. His severance is modest compared to his future remuneration potential.

In a sense, what’s interesting is that American Airlines doesn’t actually get very much here for their $1.4 million. I’d have probably preferred to use his lump sum $968,750 to partially fund a longer severance period during which he remained on payroll and remained subject to restrictions. In other words, “gardening leave” in order to buy a longer period for his unique knowledge of American Airlines plans and strategies to become stale. Whether or not Raja would have agreed, as American I’d have wanted to pay him more but also get more.

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